Multiple Choice
Auditors from the Internal Revenue Service (IRS) sent to review a company’s tax records are primarily engaged in which type of accounting?
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1. Introduction to Accounting
Types of Accounting
Struggling with Financial Accounting?
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Which of the following is a business transaction?
A
Hiring a new employee
B
Planning next year's marketing strategy
C
Discussing a potential contract with a supplier
D
Purchasing inventory for cash
Verified step by step guidance1
Understand the definition of a business transaction: A business transaction is an event that has a financial impact on the business and can be recorded in the accounting system.
Analyze each option provided in the problem to determine whether it qualifies as a business transaction. For example, hiring a new employee does not involve a financial exchange that can be recorded immediately.
Evaluate the option 'Planning next year's marketing strategy': This is a preparatory activity and does not involve any financial exchange or impact on the accounting records.
Consider the option 'Discussing a potential contract with a supplier': This is a discussion and does not result in a financial transaction until the contract is finalized and executed.
Identify the correct answer: 'Purchasing inventory for cash' qualifies as a business transaction because it involves a financial exchange (cash payment) and impacts the accounting records (inventory increases and cash decreases).
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